Embracer Group Plants its Flag in North America

European gaming conglomerate Embracer Group announced plans to purchase a trio of North American studios from Japanese publisher Square Enix for $300 million. The deal for Crystal Dynamics, Eidos Montreal, and Square Enix Montreal brings with it several respected IPs and, more importantly, a wealth of development talent, particularly in the mobile space.
Three’s Company
None of the studios have been on tremendous hot streaks recently, but they have ample experience and longstanding franchises.

  • Crystal Dynamics: Tomb Raider series
  • Eidos-Montreal: Deus Ex & Thief series
  • Square Enix Montreal: Developer for mobile Tomb Raider, Deux Ex, & Hitman entries

Slow and Steady
Embracer has been on a steady shopping spree recently, not so much aggressively grabbing headlines with superstar acquisitions (Microsoft & Activision-Blizzard, Sony & Bungie), but signing helpful players to round out its diverse portfolio when they become available.  The decentralized company is playing a different game from companies like Microsoft or Sony, who are vying for platform or content supremacy.

  • Dark Horse Media: Embracer bought the comic book giant in Dec. 2021
  • Gearbox Entertainment: Borderland developers were acquired in $1.3 billion deal in Feb. 2021
  • Perfect World Publishing & Cryptic Studios: Online gaming duo purchased for $125 million in Dec. 2021
  • Asmodee: Tabletop gaming company bought for $3.11 billion in Dec. 2021

Embracer isn’t expecting this deal to be a game changer or inject a huge amount of revenue immediately. As much as it may pain “hardcore gamers,” Square Enix Montreal and its mobile expertise may be the most valuable of the three studios for Embracer going forward. Gearbox’s Borderland would be a prime candidate for mobile, given the franchise’s recent success branching out from mainline entries with Tiny Tina’s Wonderlands.

  • “When AAA pipeline matures, we believe the companies will generate in average at least SEK 500 million in Operational EBIT pet year with notable upside potential”
  • Comics and board games are an option for these IPs, according to Embracer CEO Lars Wingefors

As we wrote after the Dark Horse acquisition, “the time may be ripe for Embracer’s expansion” beyond Europe. This deal makes the U.S. and Canada Embracer’s #1 and #2 countries by number of game devs. Make no mistake, these 1,100 new employees – now roughly a 10th of Embracer’s workforce – are the most valuable part of the purchase. Developers are in short supply these days, and the supply of experienced developers can’t be increased overnight.
Tomb Raider, Thief, and Deus Ex are all valuable IPs, but not transmedia IP heavyweights like Star Wars or Pokémon. Embracer’s ownership of Dark Horse, however, offers tantalizing comic book synergies for Tomb Raider and the lofty sci-fi of Deus Ex.
Who’s Next?
With Ubisoft likely to be the next huge videogame company up for sale, don’t expect Embracer to make a hard play for it. While the French publisher offers a lot of North American talent and titles, its history of scandals and inevitable large asking price makes it a poor match for Embracer if it sticks to past habits.